A cost flow model, such as an activity-based cost and management (ABC/M) model, is a multi-dimensional directed graph. It depicts how money flows in an enterprise. The nodes in the graph represent the resource, activity, or cost object accounts. The edges in the graph have a percentage on them, which defines how much money flows from a source account to a destination account.
For example in a company, money may flow through many paths, and the linkage between origin and destination can therefore become murky. Activity-based costing and management (ABC/M) systems show the flow, and can compute multi-stage partial contributions from any resource to any cost object. Graphs modeling such systems can easily have hundreds of thousands of accounts and millions of edges. Existent ABC/M systems are based on path enumeration algorithms, however, as the number of paths grows, the feasibility of “walking all paths” is significantly reduced. Following all paths is also problematic when there are cycles within the flow (reciprocal allocation models).